Five Reasons Why PlayStation 4 Will Play Used Games

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Sony (NYSE: SNE ) is getting a lot of attention this week after it was revealed that the Japanese tech giant filed a patent for a new method to keep consumers from playing used games. The technology is fascinating, to say the least. Sony believes that it can apply an RFID chip that will keep track of a game's usage history and prevent it from being played on multiple consoles.

While some consumers are accepting of the concept, most are not.

"What happens when your PS4 or Xbox 720 craps out and your games are all locked to that console?" one user, who goes by the name of Sluvxe, wrote on Kotaku .

Another user, The_Hyphenator, said that this could keep him from buying another Sony console. "If this is the case, then I'm definitely going ahead with my plan to go Wii U/PC only this generation," he wrote. "If all console games (except the Wii U) are going to be DRM'd like this, then I may as well go with the PC for all my non-Nintendo needs, since I can at least get my DRM'd games on the cheap that way."

"We keep hearing about this patent, but it never actually shows up," added Kotaku user TRT-X. He said that in addition to limiting the sale of used games, this technology would prevent consumers from lending or borrowing games. "My guess is that everybody is rushing to be the one to own the technology, but nobody wants to be the first to implement it due to the completely understandable backlash from the gaming community."

In May 2012, former Wall Street Strategies analyst Brian Sozzi told Benzinga that game companies might limit themselves if they eliminate the sale of used games.

"If Microsoft bans used games, then maybe I don't go to GameStop (NYSE: GME ) and buy a new game," said Sozzi. "So it could have a cascading effect where you cut your nose off to spite your face."

At that time Microsoft was rumored to be experimenting with new anti-used game technology. Benzinga outlined five key reasons why Microsoft will ultimately abandon any plans it may have to eliminate used games.

One of the most important reasons involves the hundreds of millions of dollars that are spent on new games with the help of store credit . That credit is obtained by selling old software.

In 2011 alone, GameStop returned $1.2 billion worth of trade-in credits back towards the purchase of new video games. No company -- not Sony, Microsoft or any other firm -- would sacrifice a billion dollars just to eliminate the sale of used games.

These are just a few of the reasons why PlayStation 4 will play used games. Here are a few others:

The Added Expense Cannot be Justified

While it is wholly possible that the standard MSRP will rise from $59.99 to $69.99 during the next generation, Sony cannot afford to implement a technology that raises the cost of every game sold. It would not be worth the trouble -- or the added expense.

Patents Reveal Proof of a Concept, Not Proof of a Product

Apple (NASDAQ: AAPL ), Google (NASDAQ: GOOG ), Research In Motion (NASDAQ: RIMM ) and Nokia (NYSE: NOK ) hold thousands of patents they will never use. Sony is no different.

This anti-used games patent is an important part of Sony's portfolio. The company may never build a product, but it could use it to defend against a potential lawsuit or to legally attack other firms that attempt to ban used games.

The Patent Might be a Dud

Anyone can file a patent that explains the theoretical solution to a problem. In practice, however, most patents are duds. They provide a nice blueprint for how something could work, but the results are rarely on par with the vision.

Thus, Sony may test this technology to see if it works, but that does not mean that it will.

Retailers Can Fight Against It

Retailers despised the PSP Go , a newer version of the original PlayStation Portable that could not play games that were purchased in-store.

Sony released the device to see if consumers were comfortable with an online-only environment that required users to download all of their games, just like an Apple device. Consumers were not impressed. Thus, Sony created a cartridge format for its new handheld, PS Vita.

At the same time, Sony rejected a concept for an online-only game console. Once again, consumer acceptance was at the core of the company's decision.

However, retailers hold just as much power, if not more. While Best Buy (NYSE: BBY ) and Target (NYSE: TGT ) may not care to get into a fight with Sony, GameStop has the power to refrain from selling PlayStation 4 if it contains anti-used game measures. This might sound like an unorthodox strategy for the retailer to take, particularly when it did not fight against the online pass system implemented by Electronic Arts (NASDAQ: EA ) and other game publishers. If this feature were built into the console, however, it would be far more serious.

Investors seem to agree. Shares of GameStop declined more than six percent Thursday.

The Technical Hurdles Would be Catastrophic

If Sony overcomes the initial obstacles and bring an anti-used games console to market, the company will still have to deal with a cornucopia of problems once the machine is used by consumers. From glitches and chip failure (ex: RFID chips that are broken before the game is purchased) to hardware and software malfunctions, this anti-used game technology is a disaster waiting to happen.

Follow me @LouisBedigianBZ

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AAPL , BBY , GME , GOOG , RIMM

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